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The Anatomy of a Civil Lawsuit (Part I of II)
Imagine you have been injured by a defective product. Obviously, the first thing you are going to want to do as you recover from your injuries is call me. While most people have a vague idea of what goes on in a civil lawsuit, I would like to provide you with a little more insight just in case you are ever personally involved in one.
OK, so back to our scenario: You were outside using your brand new weed-whacker when the housing unit on it cracked causing the spool of line to fly off and hit you in the leg, shattering your kneecap. While you are going to be whisked off to the hospital it is important to let your spouse or someone in your household know that they are to gather up the weed-whacker and all of the parts that came off it and put them somewhere for safekeeping. It is extremely important to preserve the evidence.
When you meet with me to tell me how the accident happened, whether it is at the hospital or after you have returned home, I am going to make arrangements to get the weed-whacker and take it to someone to perform a thorough investigation of it to give me an opinion as to why it malfunctioned. In a case like this I would most likely take it to either a mechanical or civil engineer. Once I receive an opinion stating that the product was defective I will send a letter to the manufacturer wherein I describe how the accident happened, what your injuries are, and why the product is defective. I generally cannot make a settlement demand at that time, because I won’t have a full prognosis regarding your injuries nor will I know when you will be able to return to work. Sometimes it can take up to a year or longer before we know if you will be permanently disabled from your injury and when, and if, you can return to work. However, once we have all of that information, you and I will sit down and formulate a settlement demand taking into consideration, the length of your medical treatment, any permanent disabilities you suffered, pain and suffering and lost income. If you are married we will also make a settlement demand on behalf of your spouse for loss of consortium.
If the manufacturer, or more likely its insurance company, rejects our settlement demand, we will file a Complaint in the appropriate court against the manufacturer. If the manufacturer is a Pennsylvania corporation we can file the Complaint in either the county where the accident occurred or the county where the manufacturer is located. If the manufacturer is located outside of Pennsylvania we will file the Complaint in Federal Court. The Complaint sets forth the identity of the parties, how the accident happened, that the product was defective and what your injuries are. It also extremely important to remember that if you want to file a Complaint for personal injuries in Pennsylvania, you must file your Complaint within two years of the date of the accident. Within twenty to thirty days of us filing the Complaint the defendant manufacturer will file an Answer to the Complaint. Generally, the defendant will deny in its Answer that the product was defective, or allege that you were not using it properly or that your injuries are not as bad as we say they are. Also, under Pennsylvania law, I can also sue the seller of the defective product along with the manufacturer.
Next comes the discovery phase where both sides exchange information relevant to their case. We would provide the defendant with all of your medical records and documentation regarding lost wages. From the defendant I would want information regarding the design of the weed-whacker, and I would want to know if this malfunction had occurred while the product was being used by others. The defendant would also want to take your deposition. At your deposition I would be there as would the attorneys for the defendants. There would be a court reporter who would administer an oath to you, just like you were in court. Then the attorneys would ask you questions about the accident and your injuries. The court reporter would record everything that is said. I would take the depositions of persons employed by the manufacturer who were knowledgeable about the design of the weed-whacker.
Many times cases will settle after the discovery phase, because the plaintiff’s attorney will have enough information to make a reasonable settlement demand; and the defense attorneys will have sufficient information to make a reasonable settlement offer. However, if the parties cannot reach a settlement the case will proceed to trial. In the next installment I will talk about the trial of personal injury lawsuit.
Audit Proofing A Tax Return
The IRS only audits about 1% of all individual tax returns filed. Ever wonder why some returns are audited while others are not. According to a recent survey of tax professionals, there are sever items that are audit red flags the lead to IRS audits. We will discuss what they are and how to avoid them.
1. Failure to Report All Income – By far, the largest reason for an IRS audit or correspondence letter is failure to report all income. The IRS matches the 1099's from all interest and dividend income, stock sales, miscellaneous compensation, rental income and other sources to the individual return. Make sure to provide all 1099’s and pertinent tax information to you CPA each year.
2. Math Errors - These errors are more rare since the vast majority of tax returns are prepared by a tax software package of some sort. If you still prepare any tax returns by hand, make sure that you double-check all of the numbers and calculations.
3. Higher than Average Tax Deductions – The IRS computer system routinely matched individual tax return deductions to income levels based upon historical averages. If your tax return files out of that range, the IRS computer system will highlight those returns for possible review or audit. Most tax software packages can compare you tax deductions to national averages based upon your income. Review these results with your CPA or tax preparer.
4. Certain Business Tax Deductions – The IRS places more emphasis on reviewing the following business deductions:
a. Home Office Expenses
b. Business Meals & Entertainment
c. 100% use Business Vehicles
d. Claiming Business Losses – Hobby
You may be legally entitles to take the deductions listed above, but be aware that your chance of an IRS audit are greater.
5. Complex Tax Returns – Individually Prepared – As a general rule, if you prepare a complex tax return, with stock options, housing tax credit, natural gas royalties & depletion, or multi-state tax returns, the IRS is likely to review how the tax return was prepared. I have met with IRS agents that indicated complex tax returns prepared by a CPA or licensed tax preparer were less likely to be audited than those prepared by the individual taxpayer.
